Q. Does the exit tax apply to 100 percent disabled veterans? I bought the home when I was stationed here and then had to rent it out when I received orders to another base. Subsequently, I retired last year and have been awarded 100 percent disability.
A. Your service isn’t going to get you any special exit tax treatment.
New Jersey grants a real property tax exemption to disabled veterans who are certified by the Veterans Administration to have a wartime service-connected 100 percent permanent and total disability, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
He said the disabled veteran must meet all requirements of New Jersey citizenship and legal or domiciliary residence in the state, principal or permanent residence in the claimed dwelling, full property ownership, active wartime service in the U.S. Armed Forces and must have an honorable discharge.
“This exemption is for property tax, not income tax,” Kiely said. “If you are a resident of New Jersey and the home in question is your principal residence, then the requirement to make an estimated income tax payment upon the sale of real estate does not apply to you.”
That estimated income tax payment is what’s known as the exit tax. People often get it wrong, thinking this is a real estate tax payment.
Kiely said the so-called exit tax is two percent of the gross sale price of the home, without regard to whether there is a capital gain on the sale.
So even if you lost money on the sale, he said, you still have to send 2 percent to the state, he said.
“You are paying the 2 percent as an estimated income tax payment,” he said. “This forces the seller to file a Non-Resident Income Tax return for that year.”
If you lost money on the sale, or if there is no capital gain tax to pay, you get your entire 2 percent back, he said.
And unfortunately for you, there is no exception in the law for a disabled war veteran.
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